DHF Company Has a Beta of 1

question 1

Multiple Choice

DHF Company has a beta of 1.5 and is currently in equilibrium.The required rate of return on the stock is 12.00% versus a required return on an average stock of 10.00%.Now the required return on an average stock increases by 30.0% (not percentage points) .Neither betas nor the risk-free rate change.What would DHF's new required return be?

• A) 14.89%
• B) 15.68%
• C) 16.50%
• D) 17.33%
• E) 18.19%

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Definitions:

Oligopoly

A market structure characterized by a small number of firms dominating the market, leading to limited competition and higher prices for consumers.

High Barriers

Obstacles that make it difficult for new entrants to enter a market, including high starting costs, stringent regulations, or strong competition.

Differentiated Products

Goods or services that are distinguished from others by quality, branding, or other features, leading to non-price competition among firms.

Collude

When two or more firms work together to set prices, limit supply, or engage in other practices to restrict competition and manipulate market outcomes.